The development of its Kings deposit and completion of the
fourth berth at its Herb Elliott Port will be deferred until
prices rebound, the Perth-based company said today in a
statement. The shares declined in Sydney to the lowest in almost
three years after the company reduced its annual production
forecast by as much as 5 percent to between 82 million and 84
million metric tons.

BHP Billiton Ltd., the world’s biggest miner, last month
delayed about $68 billion of projects, including an iron-ore
port expansion, amid sluggish global growth. Fortescue may need
to raise as much as $2.3 billion in extra debt if prices stay at
current levels, JPMorgan Chase & Co. said Aug. 29.

“After the market digested the news, longer-term
uncertainty about the iron ore price played a role in today’s
trading,” Adrian Prendergast, an analyst at E.L. & C. Baillieu
Stockbroking Ltd., said by phone today from Melbourne.

The shares fell 4.2 percent to A$3.41 in Sydney, while the
benchmark S&P/ASX 200 Index dropped 0.6 percent. Fortescue
earlier today rose as much as 3.4 percent to A$3.68.

Delaying Expansions

Fortescue told analysts on a call today that it would wait
to see if the price recovers before moving forward with the
expansion plans, said Prendergast who was on the call.

Iron ore prices fell to a three-year low of $88.70 last
week. Chinese steelmakers are struggling to remain profitable
after they ramped up capacity, only for sluggish demand to send
steel prices tumbling.

Fortescue today set a “near-term” production goal of 115
million tons a year by completing the expansion of the Christmas
Creek mine, starting the Firetail deposit and delivering port
and rail projects.

The company had planned to reach an annual production rate
of 155 million tons by the end of June next year, it said Aug.
23. It aims to complete development of its Solomon project when
the market improves and has the option to resume expansion to
reach 155 million tons, Chief Executive Officer Neville Power
said.

“These measures reflect the company’s ability to reduce
and delay cash expenditures to meet market conditions and
provide us with head room in the event of further deterioration
of iron ore prices,” Power said in the statement.

Chinese Growth

Concern that capital expenditure is slowing in Australia’s
resources industry comes amid signs of waning growth in China,
the biggest commodities consumer. Australia is the world’s
largest supplier of iron ore and coal. Reports of the nation’s
mining boom ending were exaggerated, Prime Minister Julia
Gillard said today.

“This is a boom with three distinct phases,” Gillard said
at a conference in Perth, according to an e-mailed text of the
speech. “A prices boom, which is now passing. An investment
boom, still to reach its peak as seen in those remarkable capex
figures. A production boom, as all that effort comes to fruition
in the years and decades ahead.”

Fortescue is in advanced talks on the sale of its Solomon
power station and in discussions with two “major” investors
over the partial sale of its North Star magnetite project, the
company said.

Fortescue Debt

Fortescue needs iron ore prices to average above $115 a ton
to avoid refinancing its first major debt repayment of $2.4
billion in 2015, Credit Suisse AG analysts Matthew Hope and
Michael Slifirski wrote in an Aug. 27 report. The company may
face a debt-rating cut as a result of the drop in prices,
Moody’s Investors Service said Aug. 30.

“They’re taking pretty clear actions that should enable
them to get through the next 12 months,” Chris Drew, an analyst
at RBC Capital Markets, said by phone from Sydney. “If this
works as planned, they don’t need to raise additional funds.”

The company expects iron ore prices will return to more
than $120 a ton later this year, Power told reporters last week
in Sydney. The price may average $145 a ton in the final quarter
of this year, according to the median of seven analysts
estimates compiled by Bloomberg.

BHP had been due to decide this year on approving three
major projects including an iron-ore port expansion in Western
Australia before it said last month it would delay all
decisions. The three major projects may cost a combined $68
billion to build, according to a May 23 estimate from Deutsche
Bank AG.

The relative yield on Fortescue’s biggest line of bonds --
$2.04 billion of 7 percent notes due 2015 -- surged 162 basis
points last week to 685 basis points more than Treasuries, the
highest since November, according to Trace, the bond-price
reporting system of the Financial Industry Regulatory Authority.